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Amway/Quixtar North America - Confronting Brutal Reality
The 2007 sales in the North American (English speaking as a first language) market
have plummeted 60% in adjusted real dollars when compared to the 1980 North American
sales! How long will the free fall continue before there are major changes in Amway
North America?
Today, I am going to teach on the importance of confronting the brutal reality in
any business venture. This article is an attempt to help Amway/Quixtar North America
confront the brutal reality to help the remaining IBOs have a competitive chance
in the marketplace. Amway needs leaders willing to confront the brutal facts and
make the necessary changes to get their business competitive in today’s information
age. There is too much information available today for poor practices to be overlooked
or hidden. I provide this leadership lesson free of charge to help the struggling
managers improve their performances.
In 1980 Amway North America was just under $1 billion in sales (approximately 856
million). According to sources close to the company, Amway reported their sales
at this time in retail dollars and not wholesale dollars. Since 1999, Amway/Alticor/Quixtar
has reported their sales in wholesale dollar amounts. I welcome any corrections
to the following analysis as I am seeking the truth and to teach how to confront
reality.
$856 million in sales retail is $856/1.32 = $648 million in sales wholesale. This
is calculated by dividing out the 32% markup (1.32). This is the average percent
difference from the whole sale price to the retail price.
A business that was doing $648 million in sales in 1980 dollars is the same as a
business doing $1.630 billion in 2007 dollars according to the inflation index.
Quixtar announced sales in 2007 that amounted to $1.072 billion. This amounts to
a $558 million dollar loss in equivalent 2007 dollars! This is a shocking 34% decline
since 1980 in real volume. I am not even factoring in the new Caribbean markets
that Amway/Quixtar has opened since 1980, which would make the numbers worse.
The other factor to consider is that the multi-cultural business was minimal in
the North American market in 1980 and accounts for approximately 40% today according
to Ken McDonald former managing director of Quixtar. This would mean the English
speaking as a first language business has reduced from $1.630 billion (inflation
adjusted dollars) in 1980 to 60%*($1.072 billion) = $987 million loss of the 1980
volume adjusted for inflation in the English speaking first language market in America.
This is over a 60% decline in sales and explains why the vast majority of diamonds
did not requalify or are not even in the business today. When people invest 5, 10,
20, 30+ years of their life into a business project – it is a unconscionable to
see so many of them ground up through a declining business.
This is where leadership as described in Chris Brady and my book, Launching a Leadership
Revolution is so important. It does not take 27 years to determine that Amway sales
losses are systemic in the North American business. Quixtar was launched in 1999
to stem the tide of losses, but has been an abject failure and now the company is
changing back to the Amway name - a clear admission that the Quixtar model has all
the same inherent faults in North America as Amway did previously.
Now you know why I sat down with the Amway managers on August 9th. I finally came
to the conclusion that Amway managers were not willing to confront the brutal reality
and the only people being brutalized by their inactions were the distributors businesses.
Why are people being sued for jumping off a ship that has been sinking for 27 years?
If anyone should be sued, shouldn’t it be the managers who sunk the ship in the
first place? These are leadership questions that are of the utmost importance. When
a company will not accept responsibility for their failing model, they will gladly
invest time and money to search for scapegoats. This allows them to remain oblivious
to the answers for the systemic problems inherent in their struggling business.
This behavior only sentences the remaining Amway distributors to more pain and more
lost sales as the real issues are not being addressed.
Here is my free advice for the Amway managers:
1. Admit the model is not working and accept responsibility to
change it. Until you accept responsibility for the problem – it will be blamed on
outside forces instead of poor internal strategies.
2. Allow people to leave your company if they are not happy. Forcing
people to stay against their will is against everything your founders of the company
believed. 3. Apologize to all former distributors for their years
of wasted efforts to build a business that was in a near free fall. 4. Create products
with true value propositions and get your compensation plan out of the 1960’s and
into the 21st century.
I speak to thousands of people around the country on the basic principles of business
ownership and leadership. I recommend that Doug and Steve start the Amway managers
on a personal development program of books and CD’s. There are some great leadership
development seminars available also that would improve the emotional intelligence
and business strategies of the Amway managers. As John Maxwell states, “Everything
rises and falls on leadership.” Judging by the sales of Amway North America, I believe
that the Amway managers are receiving poor grades on their leadership competence.
If Dick Devos believes he has the ability to run the state of Michigan as Governor,
then I would recommend that he prove it on his beloved Amway business first. It
would make Dick’s message more palatable to the Michigan voters. The Amway managers
are welcome in advance for this free advice.
God Bless, Orrin Woodward
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